Oregon state income tax

This notebook shows how Oregon’s state income tax, including credits, operates holistically.

Examples

from policyengine_us import IndividualSim
import pandas as pd
import plotly.express as px

LIGHT_GRAY = "#F5F5F5"
GRAY = "#BDBDBD"
BLUE = "#5091cc"
LIGHT_BLUE = "lightblue"
DARK_BLUE = "darkblue"


def make_tax(adults, children):
    sim = IndividualSim(year=2022)
    sim.add_person(name="head", age=25)
    members = ["head"]
    if adults == 2:
        sim.add_person(name="spouse", age=25)
        members += ["spouse"]
    for i in range(children):
        child = "child{}".format(i)
        sim.add_person(name=child, age=6)
        members += [child]
    sim.add_tax_unit(name="tax_unit", members=members, premium_tax_credit=0)
    sim.add_household(name="household", members=members, state_code="OR")
    sim.vary("employment_income", max=300_000, step=100)
    employment_income = sim.calc("employment_income")[0]
    state_income_tax = sim.calc("state_income_tax")[0].round()
    mtr = sim.deriv("state_income_tax", "employment_income", wrt_target="head")
    return pd.DataFrame(
        dict(
            employment_income=employment_income,
            state_income_tax=state_income_tax,
            mtr=mtr,
            adults=adults,
            children=str(children),
        )
    )


# Make a table of state taxes for different numbers of adults and children.
l = []
for adults in range(1, 3):
    for children in range(0, 4):
        l.append(make_tax(adults, children))

df = pd.concat(l)

LABELS = dict(
    employment_income="Employment income",
    state_income_tax="Oregon tax",
    mtr="Marginal tax rate",
    adults="Adults",
    children="Children",
)

COLOR_MAP = {"0": GRAY, "1": LIGHT_BLUE, "2": BLUE, "3": DARK_BLUE}

fig = px.line(
    df,
    "employment_income",
    "state_income_tax",
    color="children",
    animation_frame="adults",
    labels=LABELS,
    title="Oregon state income tax",
    color_discrete_map=COLOR_MAP,
)
fig.update_layout(
    xaxis_tickformat="$,",
    yaxis_tickformat="$,",
    plot_bgcolor="white",
    xaxis_gridcolor=LIGHT_GRAY,
    yaxis_gridcolor=LIGHT_GRAY,
)
fig.show()

Building simulation with reform ()

Building simulation with reform ()

Building simulation with reform ()

Building simulation with reform ()

Building simulation with reform ()

Building simulation with reform ()

Building simulation with reform ()

Building simulation with reform ()

Total marginal tax rates range from -4.1% for filers in the EITC phase-in region to +10.6% to filers in the EITC phase-out region; this exceeds the 9.9% marginal tax rate on top earners. In addition, Oregon’s tax system creates cliffs due to (a) income limits on the exemption credit, and (b) the step-down of the federal tax liability subtraction.

fig = px.line(
    df,
    "employment_income",
    "mtr",
    color="children",
    animation_frame="adults",
    labels=LABELS,
    title="Marginal tax rate for an Oregon household",
    color_discrete_map=COLOR_MAP,
)
fig.update_layout(
    xaxis_tickformat="$,",
    yaxis_tickformat=".1%",
    yaxis_range=[-0.15, 0.15],
    plot_bgcolor="white",
    xaxis_gridcolor=LIGHT_GRAY,
    yaxis_gridcolor=LIGHT_GRAY,
)
fig.show()